Citi Fined $30 Million By Massachusetts Over Unreleased Apple Data Sharing

[MacRumors]

Citigroup has been fined $30 million by the Commonwealth of Massachusetts in a settlement after a Citi analyst sent confidential research information to major clients without sharing it with the public, reports Reuters.

The research, which included negative order forecasts for the iPhone, was shared with major Citi clients including SAC, T. Rowe Price, Citadel, and GLG partners -- but not with Citi's retail investors, putting them at a competitive disadvantage.

"The emails between Kevin Chang and the hedge funds reveal this cozy culture which illustrates again that there are two types of customers; big ones and retail customers who often dont' receive this information," [Massachusetts Secretary of State William] Galvin said in a telephone interview.

The complaint cites an email from an unidentified SAC employee who asked a contact at Citi "can u send me everything u have on the entire iphone 4/4s/5 supply chain?.

Citi employees responded immediately by asking their colleagues "can you please send directly to (employee for SAC Capital) ... He needs it asap - works directly for (SAC Capital).'

Citi was previously fined $2 million by Massachusetts for improper disclosures related to Facebook's IPO last year. The analyst in question, Kevin Chang, was terminated by Citi last month.

Article Link: Citi Fined $30 Million By Massachusetts Over Unreleased Apple Data Sharing

 

[rackham12]

Does this mean the inventory for 4/4s/5s for launch date before launch date or what does supply chain mean

 

[Worf]

Does this mean the inventory for 4/4s/5s for launch date before launch date or what does supply chain mean

Young business student here so here's my oversimplified take on it...

Sounds like there's a disparity of information being divulged between institutional investors and individual ones. This disparity is important because institutional investors can move vast amounts of capital to purchase stock and influence trading price. Low inventory/high demand for Apple's stock could lead to a rise in their share price. When retail investors (I think this means individual investors) are not privy to this knowledge, they are the last ones to be able to act on it.

Would love someone else to elaborate and/or correct me if I'm wrong.

 

[Solomani]

It's insider trading, which is illegal in the USA. Was this Kevin Chang guy not arrested? The only punishment he got was being fired from his job at Citigroup?

 

[Parasprite]

dont'

*twitches involuntarily*

 

[rmatthewware]

It's illegal, immoral, and unethical, and it will keep happening until the major players do major jail time. When a company is public any information that gets released should be released to everyone at the same time. But just like the Facebook IPO, companies play favorites to reward the people they like.

 

[scottwaugh]

Young business student here so here's my oversimplified take on it...

Sounds like there's a disparity of information being divulged between institutional investors and individual ones. This disparity is important because institutional investors can move vast amounts of capital to purchase stock and influence trading price. Low inventory/high demand for Apple's stock could lead to a rise in their share price. When retail investors (I think this means individual investors) are not privy to this knowledge, they are the last ones to be able to act on it.

Would love someone else to elaborate and/or correct me if I'm wrong.

No I think you totally see it clearly.

The short version would be that yes, the game is still rigged. Hat tip to Gordon Gecko...

 

[kkent25]

That's how the big boys roll.

 

[old-wiz]

It's illegal, immoral, and unethical, and it will keep happening until the major players do major jail time. When a company is public any information that gets released should be released to everyone at the same time. But just like the Facebook IPO, companies play favorites to reward the people they like.

Absolutely. The big players cheat all the time. The only time they consider it wrong is if they get caught, and then they usually just slip the regulatory people some extra cash under the table, if that fails they get a slap on the wrist and they promise "we wil never do it again" (hah!). Bribery works wonders when dealing with regulatory agencies and the U.S. government in general. And do they ever actually pay the fines? What happens to the money? Does it really go to the government or do the regulatory agencies people simply pocket it?

 

[aristotle]

Finally, they are cracking down on the insider trading surrounding Apple. Sorry Mac Rumours, but you will have to go back to speculation and vague rumours.

 

[JAT]

I don't understand. Do intelligent people still use giant banks?

 

[lightning finge]

The analyst in question, Kevin Chang, was terminated by Citi last month.

seems a bit harsh!
did they send in the T-1000s?

 

[albusseverus]

Absolutely. The big players cheat all the time. The only time they consider it wrong is if they get caught…

I too, thought this was normal. Bank moves first, then their biggest clients, then the suckers get fleeced.

Maybe what went wrong here, was that they too greedy to even give the suckers the chance to get in 3rd. They just hung them out to dry.

Bank & big clients make a bigger profit, government gets upset that they went too far. A little insider trading is Ok, just don't be so obvious or the public might wise-up and start to question the legitimacy of the whole system. And the government can't have that, because they profit from it, too. If you follow this logic, you might like the No Agenda Show.

As for iPhone supplies - Apple's stock price is the classic case of the share market not being what it claims to be. It doesn't reward well run companies, it makes money on artificially pushing up the price, then dropping it. Big boys' gambling, that's all - and in my mind, immoral.

 

[Gutwrench]

It's insider trading, which is illegal in the USA. Was this Kevin Chang guy not arrested? The only punishment he got was being fired from his job at Citigroup?

How is this "insider trading?"

 

[ChrisNH]

Need to Replenish the Food Stamp Program

Massachusetts is a welfare state, an 'entitlement' state. Everyone knows this to be true. But when the money isn't coming in through normal channels (income taxes) at the rate and volume you need to 'feed the beast,' then you go knocking on other doors.

Hello Citi

(with apologies to 'Hello Kitty.')

 

[NY Guitarist]

Too big to fail = Too big to jail?

----------

Massachusetts is a welfare state, an 'entitlement' state. Everyone knows this to be true. But when the money isn't coming in through normal channels (income taxes) at the rate and volume you need to 'feed the beast,' then you go knocking on other doors.

Hello Citi

(with apologies to 'Hello Kitty.')

Absurd. Are you saying that Citi conducting illegal activity is ok?

 

[futbalguy]

Its not insider training. Citi did research and only shared their info with certain investors instead of every one of their customers. I actually do not see this event as necessarily nefarious. One of their clients specifically asked for some research and the analysts sent it over. They apparently are required to share that info with all of their clients. Its not unusual to treat your big clients a little better than the rest though. Obviously its illegal though.

 

[Gutwrench]

Its not insider training. Citi did research and only shared their info with certain investors instead of every one of their customers. I actually do not see this event as necessarily nefarious. One of their clients specifically asked for some research and the analysts sent it over. They apparently are required to share that info with all of their clients. Its not unusual to treat your big clients a little better than the rest though. Obviously its illegal though.

Agree, it's not insider trading.

 

[eastercat]

$30 million is peanuts to Citi. If the government was serious about stopping this, they would've fined Citi an amount that would've hurt.

 

[jctevere]

I personally think the fine was excessive... The analyst was sending research information. This was not insider information that could not be obtained by anyone else. The issue here was they only provided this information to the companies that asked, instead of their entire client base.

I guess it was a silly mistake on the analysts part to just send the research directly to the client instead of asking for approval or if he was allowed to do this. However, I also think that it is a bit harsh to fine Citi $30 million because they didn't send this information to every client they have...

 

[zync]

Isn't the bigger problem the fact that a guy who types corporate emails like a texting teenager ended up indirectly costing Citi thirty million dollars?

can u send me everything u have on the entire iphone 4/4s/5 supply chain?.

If I ran a huge corporation and found out an employee sent a message like that using our email, they'd find the contents of their desk in FedEx boxes on their porch. Did they honestly think that displayed the proper image of a financial company? I've had unsolicited emails with better decorum.

----------

Also, apparently Reuters doesn't know how to use quotation marks. This quote started with one and ended with a period. The next one starts with a double quote and then ends with a single quote.

So it's impossible to determine if the original inquiry ended with "?." or just a question mark. I wouldn't put it past him either way.